Socialism, What’s the Difference?

Noam Chomsky, Bernie Sanders, and Vladimir Lenin walk into a bar. The bartender says, “What’ll it be?” Lenin immediately climbs up on a stool and loudly proclaims, “We, the intellectual vanguard of the people, shall seize the means of production in the name of the people!” Bernie Sanders gently replies, “No, my dear Lenin. It is the freely elected government of the people who must seize them.” To which, Noam Chomsky quickly retorts, “Not at all, it’s the individual people themselves, who must seize them.” The bartender picks up the phone, “Officer, I got a trio of thieves at my place. Come arrest ’em.”

In the eyes of the doctrinaire capitalist, all sorts of socialism are the same, they are all theft. Internally, there is a good deal of division. The media has what I’ll call the short-division understanding of political economy. Remember learning short-division? Where five divided by four was one, remainder one. It’s like that, but with economics. This elementary-school version of political economy has capitalism on one end of a short spectrum and socialism/communism at the other. Essentially, it boils decades of diverse economic and political theory into capitalism and others. Obliterated are the intricate nuance and subtle variety that separates even pro-capitalist thought into over a dozen distinct theories. There are a few, ill-defined buzzwords that get carelessly banded around the information superhighway like drunks on the freeway. Terms like “neoliberal”, “neoclassical”, and “democratic socialism” take on a loose association with a political side like “neoclassical” = right-wing and “democratic socialism” = left-wing, or falls helplessly in between them confusing most people who hear them like “neoliberal” and “libertarian” and “libtard”. Are those that left-wing or right or good or bad? How should I feel about them? The point here is that the names don’t matter, but the theoretical positions do. So I want to take the next five minutes of your life and give you the gift of understanding the difference between “libertarian socialism”, “democratic socialism”, and Soviet-style communism.

Soviet Russia is indisputably the icon of socialism the world over. It’s not the original socialist theory and you’d probably be surprised to learn that it is a dubious successor to Marx’s theory. The Bolsheviks claimed descendancy from Marx and Engels, but Leninism grossly over-emphasizes economics, twisting Marxism into something ideologically self-defeating in order to make it negotiable under the labyrinthine socio-political climate of Czarist Russia. Leninism agrees with Marx that the bourgeoisie illicitly own the means of production and that it would only be through revolution that they can be used for the betterment of all rather than for the eternal enrichment of a few. And that’s where the important similarities stop because Lenin had to invent a practical scheme to bring about what Marx said would occur naturally. There is little dispute that the first Russian revolution, the February revolution was a spontaneous occurrence, revolting from tyrannical Czarist and oppressive aristocratic rule. The October revolution was not so spontaneous, in fact, it wasn’t a revolution at all; it was a coup d’etat. The freely elected government of Russia was seized by the Bolshevik party and democratic rule was supplanted for autocratic rule of the communist party. This, according to Lenin, was necessary because the people, having labored so long under the false-consciousness of bourgeoisie propaganda–what today would be called “fake-news”–could not be trusted to follow their real interests. His evidence for this was the fact that his party failed to win a majority in the general election. Lenin determined that socialism would need to be guided from above, structured by a cabal of intellectual elites who were not deceived by false consciousness. This vanguard would centrally-plan and command the economy for the people without any input from those people.

It seems obvious, now, when I put it this way, that Lenin traded economic freedom for political enslavement. He would enslave the people to free the people and then, maybe, someday, when they proved themselves ready, return them their freedom. It didn’t work out that way, obviously. We needn’t trouble ourselves with why not, because the next alternative cannot work the same way at all on principle. Democratic socialism is an alternative to the Soviet-style communism in that it believes it is the people who ought to decide on what uses the means of production are put to. In this version, the state still controls the means of production, but the state is necessarily a democratically controlled one. Myriad questions ensue, such as at what level will they be determined: nationally, communally, etc.? Or will the particulars be determined the people directly or through representatives or the appointees of representatives? Or how will the workers be paid, by the state on a fixed scale, by production rates, or by contract negotiation? How will prices be set or will products be doled out on some scheme? But these questions don’t really affect us here. The point is that democratic socialism hopes to overcome the difficulties of Soviet-style communism by bringing in the voice of the people, that is allowing them to weigh in on how socially controlled economic mechanisms are run.

Is such a system possible? Of course, it is. Take central planning, one could “centrally plan” an economy democratically by taking orders from every individual and making products to correspond with the orders. Technically-speaking that’s not a market, it’s a centrally planned economy with a single producer. Would it be efficient? Hmmm, that depends on what you mean by “efficient”. Would we overproduce, no, it would never produce anything for which there was not already an order (at least not in theory)? But it would be terribly inefficient having to wait for your order to be made and difficult to anticipate your needs well in advance. Plus, fairly limiting how much each consumer could order at a time. Still, it could all be worked out. The real question is, “is it more desirable?” I’m not so sure. Such a market would be like letting Amazon take over everything and then nationalizing Amazon. Monopolies are unquestionably efficient but they are also condensers of power. By reducing options to one, they eliminate choice to everyone except the one who decides on what to produce. Maybe we could all decide, but how? It’s unfeasible to think we’re all going to vote every time there is a decision at “National Amazon” and even if we did, how should we count the votes? Majority rules hardly seems fair. The logistical encumbrances quickly swamp the advantages the democratic socialist system provides.

A point should be made here about the so-called Nordic socialist countries. To be clear, they’re not really socialist at all. These countries share a strong devotion to welfare-state policies. We might add a fourth type of socialism in here, “welfare-state socialism” but this would be more confusing than illuminating. Capitalism, as I have argued elsewhere, should be defined by the legal determination that the owners of an enterprise or an estate be the owners of the capital in that enterprise or estate. These countries economic systems fit this description and therefore are best classified as capitalist. They simply use these myriad social programs to buttress capitalism and hedge in its worst tendencies the way the United States used to under Keynesian economic policies from the nineteen forties to the nineteen seventies. The best term for these countries then would be “welfare-state capitalist” and not socialist at all. It has been a rhetorical deception of laissez-faire theorists to classify such systems as “socialist”.  

Returning to our main discourse, we’re not stuck choosing between democratic socialism and unfettered capitalism; we might choose libertarian socialism. This oxymoronic sounding theory is unlike the others in that it disagrees that market mechanisms and private property in the hands of the bourgeoisie are the root cause of the problems with capitalism. Libertarian socialism holds that the problem of capitalism has to do with the organization of private property and not the existence of it. In this case, we can imagine a principled order that allows for private property, market exchanges, and most of the other staples of capitalism, but removes the exploitative rules regarding rent, interest, and capitalist profit as contradictory with private property ownership itself. With these exploitative elements eliminated, many attributes of capitalism change form, e.g. the overwhelming and incessant need to accumulate more wealth. This desire is capped by the concept that you cannot make money from money without rent, interest, and profit, so there is a finite amount of labor you’re willing to do beyond what you need to meet your needs. The desire to come to dominate all other businesses, the desire for monopoly, the desire for ruthless business practices, all have their teeth pulled. Included also is a guaranteed income which is required to prevent anyone in a society from forcing anyone else into a life of servitude in order to attain one of unearned leisure; in order to remove the one, the other must be dispensed with as well.

Libertarian socialism differs from other forms of socialism in that it emphasizes the freedom of individuals to make individual choices. It differs from libertarianism by arguing that societies have rights and privileges that individuals do not. The basis of this argument rests on the needs of groups to foster a sense of unity, without which there can only be lawlessness. The preservation of unity is a responsibility of societies which cannot be reduced to the individual members who make them up. This disagrees with libertarianism which assumes that all rights and responsibilities of groups can and do reduce to individual rights and responsibilities. There is a thing called society from which we are each individuated. Another way to imagine it is that the rules cannot be set with any particular individual or association in mind and be just, in the same way, that a baseball league cannot create rules favoring any particular club, either explicitly or implicitly without those rules being unfair. Libertarianism, which is a close cousin to anarchism, asserts that such a league would be unnecessary except as guarantor of the rules the clubs themselves agreed to. There is the possibility of fairness here, as long as we can assume that each club was equally well off when the bargain was struck, which is a pretty remote possibility. Libertarianism is simply unlikely to turn out to be fair.

Libertarian socialism offers us our greatest chance at a sustainable, just, and fair economic system. It is the most likely to produce the massive economic requirements of our modern large-scale societies and do so in a manner that is sustainable and harmonious with our natural environment and is at the same time compatible with human dignity and our political sense of fair play or justice. Libertarian socialism is the most feasible economic system, requires the least amount of change from capitalism, and could be produced without a bloody revolution. It is quite simply our last, best hope for a better world.

Socialism & Communism, What’s the Difference?

In lay terms, Socialism and Communism are virtually interchangeable. A few people sometimes reserve communism as a reference to Soviet, Chinese, or Cuban-style economic policy, characteristically defined by a top-down power-structure, central economic planning, and a tiny cabal of party elites that plot the Revolution from a smoky, wood-paneled, underground conference room. Socialism, for these people, is whatever the Scandinavians are doing. In this post, I’d like to untie these terms from each other and–perhaps necessarily–from capitalism.

Academics do this by looking at the history of the socialist theory. They trace the course of theory as it develops nearly concurrent to capitalist economic theory in the last days of feudalism. This is a thorough way of distinguishing these broad and esoteric words, although it is a rather useless way since it is both objective and neutral and doesn’t position us–the would-be truth-seekers–in any place from which we might moralize and judge the competing theories. If you would like a thorough and unbiased history of the development of socialism and communism, I’d recommend Socialism: A Very Short Introduction by Michael Newman. Otherwise, you have a few years of study ahead of you before you can begin to untangle the mess that is political economic theory. I elect to skip all that and instead base these fundamental definitions of respective theories by identifying their essence.

Now, I probably lost the post-modernists right there, but I maintain that essence can be distilled or more accurately implanted into concepts–even grand ones–through the same method we use for everything else: reasoning. I will simply argue for an essential quality of capitalism against socialism and communism against socialism. In this case, we’ll leave socialism more or less alone, letting it be defined negatively by the essences of the theories that surround it.

To start us off then, I have argued elsewhere that the essential quality of capitalism is the set of private property rights that give the nominal owners of property claim to the products of the same. This is a fancy way of saying if you own a hammer, a nail, and two pieces of wood, it doesn’t matter who drives the nail to fix the wood together, you still own the final product. This is as true for landlords as it is for business owners. It doesn’t matter if all the money to pay for a mortgage and the maintenance of a real estate property come from the renters who live there, the landlord is still the owner. It’s not private property per se that is the essential quality of capitalism, or markets, or freedom, or anything else. It is only this legal preference regarding property that is “owned” by one person or persons while “used” by another person or persons. Essentially capitalism is about renting property. The property owner rents the item to another to use for money, just as it is done in a sale, except they retain the ownership of the item being sold. The landlord rents the house to the tenant; the capitalist rents the means of production to the proletariat; the investor rents the use of money to the entrepreneur; the lender rents the use of money to the lendee; etc., this is essential capitalism.

Against capitalism, we can lay both communism and socialism. Both reject the essential part–renting–of capitalism. However, communism goes much, much further than socialism. Communism too has an essential element and that is the abolition of private property itself. Essentially communism is an economic system founded on common property. Common property is that which everyone–or perhaps more accurately, no one–owns. Common property is confusing precisely because it is common. The main problem humans have had to deal with in material relations is the problem of common property. The world is given to humankind in common, it did not come all neatly divided up and no one has something more than a mere nominal claim to any private ownership. So, it would be easy to conclude that this natural state is the best, and communism does just that.

There is only one problem with communism: we consume individually. I can’t both eat an apple and continue to share it with everyone else. At some point the apple becomes indistinguishable from my body, it is me, and if I am to have autonomy at all over my life, the apple must be said to be mine at some point. Private property then seems to be a material fact of nature, and communism an impossibility. But that is probably going too far. An apple is not like an idea. We can share an idea commonly without making it private, that is to say, I can consume an idea entirely without the need to exclude the rest of humanity from its enjoyment, everyone else can consume it as well.

Communism then is essentially an attempt to balance private needs against social provision, and while it is possible, the same way spinning a billion plates on sticks is possible, it is impractical. I’m not saying communism is undesirable, in fact, should the technology eventually develop in which each individual is the sole producer of each and all of their wants and desires, the only common production being for common goods, such as ideas, then communism might very well prove to be the best economic system since this situation would technologically eliminate the need for trade. But we’re not there yet. We need trade and not planning. I don’t know about you, but I can barely plan for my own wants and needs, which change and evolve constantly. If I can barely do it for myself, I don’t have a snowball’s chance in hell of doing it for you, and even less for doing for thousands or millions. The best way to spin a billion plates on sticks at the same time is to have billions of individuals each spin their own.

Now my communist comrades are no doubt objecting that I have conflated private property with personal property. The difference they say is lying in what use the property is put to. There is a grave difference between the “means of production” and your toothbrush as the saying goes. I completely disagree. All property is usable. All property must be consumed individually. (Even fifty men pulling a rope, the space for each hand cannot be shared.) All property is labor-saving. All property is of this one kind. What my comrades mean to say, is that the essential quality of capitalism I mentioned earlier is not socially necessary or desirable. What they really mean is that capitalism is exploitation, and they are right. I have argued this several times elsewhere and so I won’t go into it here. But the point is that communism must ban the private ownership of the toothbrush as well as the means of production. In a world without trade, this is not really a problem, because no one else would need your toothbrush for other reasons. But in a world of trade, someone else is coveting your toothbrush and so common ownership of it would be a recipe for disaster.

Against these two we may now set socialism, which allows for private ownership but does not allow for rent. Albeit, this is a libertarian socialist conception of socialism. I will deal with intestine arguments about socialism elsewhere.

Liberating the Invisible-Hand from Libertarianism

Libertarianism often conceives of the “invisible-hand” explanation as a form of get-out-of-jail-free card. It is not the only doctrine to do so, others include neoliberalism and some strains of conservatism. In this essay, I will lay out why libertarians are inclined to believe in the absolving ability of the invisible-hand and why that may be wrong. To begin with, I will examine Robert Nozick’s concept of “invisible-hand explanations”. From there I speculate about how “invisible-hand explanations” are used by libertarians to exonerate individuals from claims of extortion and exploitation. Finally, I will show why such extortion does, in fact, take place despite the invisible-hand mechanism at work. In this essay, I will mean “extortion” to be the unacceptable situation of profiting from the unproductive coercing or defrauding of another to loss, and by “intention”, I mean deciding with reasonable knowledge of the expected outcome of one’s actions.

Nozick wrote, “[a]n invisiblehand explanation explains what looks to be the product of someone’s intentional design, as not brought about by intentional design.” The emphasis here is on the unintentional quality of a complex process. No one intends the results of the process that brings about a good or bad result. While there is a concerted effort, the effort is not coordinated because it is unknown. Each actor is acting in the dark, irrespectively of all the other actors, and consequently cannot know what the ultimate result of their efforts will be. The quintessential example is the self-interest of individual proprietors to feed, cloth, and shelter society. After all, every morning Philadelphia gets food from all over the country to feed its citizens and no one has to coordinate the effort. 

Nozick’s concern with the invisible-hand is for protecting the rights of the beneficiaries of such unintentional processes from intentional efforts at redistribution by others who feel the need to correct the results of such unintentional processes because they feel the results to be unfair, unjust, or just plain bad. But Nozick and other’s of a similar mind, defend these results as fair and just, even if they are not “good”. They claim, it is not the fault of these beneficiaries that they are beneficiaries, since the entire process that made them such developed unintentionally. I will not belabor the reader with an extended discussion of Nozick’s and other’s arguments for such an explanation. Instead, I will simply assert that this argument is used most often to defend against redistributive efforts by the left by claiming the lack of intentionality legitimates the uneven distribution of wealth on principle. Negative appearing outcomes say where one person is made insanely wealthy while tens of thousands of others work incessantly for near-poverty wages only seems unfair because of a vestigial sense of sentimentality, left-over from our primitive ancestors and an unhealthy obsession on human affairs being justified by logical reason. The question we will concern ourselves with is: when is an individual responsible for extortion? Libertarians do not deny that extortion exists. What Nozick et al. do argue is that when the process that creates what appears to be extortion is the result of an “invisible-hand explanation”, i.e. it is unintentional, no individual can be held responsible for extorting anyone. If no one is responsible for the extortion, it is not, in fact, extortion, our feelings of unfairness are misguided.

To really understand what Nozick et al. are up to, let us examine some concrete examples. Imagine you are carrying a briefcase with a quarter of a million dollars in it. You hail a taxi. Stepping in, the driver, with full knowledge of the money you carry, tells you to gift it to them or they will shoot you; they then credibly produce a pistol and aim it at you. You are of course free to choose. You can refuse to hand over the briefcase and take the bullet. Likewise, you can trade the money for your personal well being. Either way, we might say that since you were free to choose, no “robbery” took place. However, I think most of us would agree that your choice in the matter was coerced. 

The trouble with coercion is that it’s not always condemnable according to these theorists. We can easily imagine a scenario where you are nearly starving and a man offers you a job where you would work for an income that is equivalent to five percent of the value of whatever you create by your labor. You are of course free to starve, but if you take the job most libertarians would say that you chose this freely and were not really coerced. So, libertarians and neoliberals have left the burden of explaining what the difference is between the first and second cases.  It is here, where they must maintain that the former case is an example of extortion while the latter is not, that the “invisible-hand explanation” is deployed. 

The difference, they claim, is that the first case is intentional and the second case is not. The taxi driver who pulled the gun on you, set up the situation in order to get the money from you; while the boss who offers you five-percent is merely leveraging a natural situation that they neither created nor intended. While it is somewhat arbitrary whether or not and to what extent the taxi driver and the boss are creators of their situations, the point is nevertheless valid. The situation the boss exploited is not one of his own design, but that of the taxi driver is. Left here it would be reasonable to conclude that the first case is extortion and the second case is not.

But let us not leave it there, instead, let us further examine this by asking: what is it about intention that makes the first case extortion? We might speculate that Nozick et al. believe that intention is the product of specific knowledge and that without knowledge there can be no intent. This would make sense to us intuitively. Returning to the taxi, imagine this time that you merely left your money-laden briefcase in the backseat of the taxi after paying the fare. The driver takes off with it and it’s not until hours later you realize it has gone missing. Let’s further imagine that the driver about that same time discovers the money in their vehicle and claims it. Has the driver stolen or extorted your money from you? We are inclined to say no. This is simply a case of lost and found: you lost money and the driver found it. The driver lacked knowledge of the money about to come into their possession through some unintended process. This lack of knowledge equals a lack of intention. The complete lack of intention both on your part and that of the driver, in this case, legitimates the money really belonging to the driver after it was found. So, Nozick et al. would confidently conclude that the case with the boss is more like this case where the gun was pulled because of intentionality. 

But, it has not really been established how intention is made manifest. Let me assert that if we cannot have intention without knowledge, then we cannot have knowledge without intention or in philosopher-speak: knowledge of the consequences is materially equivalent to intentionality. Let us return again to the taxi and say that this third time, you have again forgotten your briefcase, but as you are exiting the vehicle, the taxi driver turns around and notices that the briefcase you brought with you is still in the backseat and not in your hand. Let’s also say that he knows it’s full of money. To be precise, the taxi driver, in this case, didn’t intend for you to leave your money and neither did you so again this case is unintended; however, the driver now has come into possession of the full knowledge that you have forgotten your money and that they stand to benefit from your loss. In this brief moment, a decision presents itself that did not occur when you forgot your money without the driver immediately realizing it. The driver, with full knowledge of the situation, has a choice. If they can choose, the outcome of the situation must–by definition–be an intended outcome. 

The taxi driver then–if choosing not to speak-up–is acting intentionally, hoping to profit from another’s unintended situation. Even though the driver did nothing to bring that situation about it is still intentional in its last act. This last act is sufficient to condemn it as extortion because it is an intentional design to benefit from another’s loss. The driver cannot be saved by our switching criteria from intention to action either. Not taking an action is to act intentionally when the lack of action is the result of a deliberate choice. Choosing to do nothing is an intentional action. Things are different when one acts or does not act without knowledge. Failing to act because of ignorance or confusion is not an intentional act. However, in the full light of knowledge that one will gain by not acting, to not act is intentional, and it is intention which, according to our libertarian theories, condemns an action as extortion.

Let us return now to the boss offering the starving person a five-percent wage. If the boss recognizes that poverty would allow him to depress the wages of the employee then the boss is extorting money from the employee even though the boss did not create the situation of their poverty. The creation of poverty is not the issue, the intention is. The boss is not extorting the employee by offering a lower wage if and only if the boss has no knowledge of the potential employee’s poverty or how that poverty would affect their choice to work for lower wages. By simply knowing that a starving person will accept whatever they can get and that this person is starving, one is in full knowledge of the situation. The choice to use it for leverage must, therefore, be seen as extortion. Contra Nozick and the rest, the boss’s case is more like pointing a gun at a person and demanding their money than it is like them losing their money in your car. The boss knew what it is was they were doing when they suggested a lower wage or they wouldn’t have known to suggest a lower wage at all. 

This illuminates what should have been obvious to Adam Smith and Robert Nozick alike: once the action of the invisible-hand is revealed, it is no longer unintentional, no longer innocent. The problem for libertarians is that the “invisible” part of the “invisible-hand explanation” is precisely what conveys the innocence, namely ignorance; but the “explanation” is the imparting of knowledge, and so promptly does away with the innocence. The unintentional situation is unintentional precisely because no one knows what exactly is happening or what the outcome will be. But the process of explaining that some good or bad outcome is the result of an “invisible-hand mechanism” is to reveal the hand at work! That is to say, explaining anything is to let people know what is happening, how their actions add-up to arrive at a specific outcome. To say that New York is fed by the self-interest of the butcher, the brewer, and the baker is to show us exactly how each contributes to the whole, and subsequently to necessitate our choice of intervening in that mechanism’s workings or to leave it alone. Either way, the leaf has fallen away and we stand nude in the full sun of knowledge.

Adam Smith himself–by the act of explaining the action of the invisible-hand in the market–made it possible to choose whether or not to hazard making corrections or by inaction leaves the system to its own devices and endure whatever consequences may come. So, the fact is that since Adam Smith’s time, the evils of economic activity brought about by the revealed workings of any invisible-hand at work are the result of an intentional choice on the part of those in power not to mitigate them. It may be that a choice to meddle will turn out worse than not meddling, but we cannot hide behind the “invisible-hand explanation” anymore. It is not invisible at all, it is a human hand, our hand, the hand of those in power and it moves as they will.

The Genius & Folly of Karl Marx

In this paper, I invite my reader to assume a particular view of Karl Marx and his theories.  In this view, we see Marx as a physician, treating an ailing society.  Through our examination of his work, we will conclude that his diagnosis is keen; in fact keener than any before or since.  However, his actual understanding of the disease is very limited, and his methods of treatment, where they exist, sadly misguided.  I don’t want to condemn him for efforts, but nevertheless, his theoretical faults are real and dire.

We will proceed by summarizing Marx’s general position on the exploitation of labor by capital and his explanation of it by means of his positive economic theory.  Our analysis will then focus precisely on the first chapter of the first volume of Capital, in which Marx attempts to render utility or use-value as a purely qualitative function of economic exchange.  I hope to show that Marx’s positive economic analysis is doomed because utility is not merely qualitative but quantifiable; in fact, it is quantifiable in units of labor-time.  With a reintroduction of use-value into the determination of an exchange-value, private property and markets for exchange become a necessary economic reality.  Finally, the paper will conclude that despite this error in Marx’s thinking, that capitalism is, in fact, exploitative of labor.   Thus, I will find that Marx’s conclusions ultimately prove correct, but not at all for the reasons he believed.


Part One

It is not clear, to me anyway, whether Marx’s theory of exploitation came as a result of his positive economic theorizing or whether his positive economic theory was devised to explain his theory of exploitation.  What is clear is that Marx ultimately links the two in such a way that future scholars, both opponents and followers of Marx, have acted as though the theory of exploitation is contingent on Marx’s positive economics.  The need to sever the causal relationship here is paramount.  To begin then I’d like to describe both of these theories independently, that is without the implicit assumption that they are causally linked.

Marx’s theory of exploitation involves only the question of who has the right to the value of the fruit of human effort?  For Marx, the answer is the same as it was for John Locke, the laborers and the laborers alone have a right to the value of the fruit of their labor.  For Locke, this meant the ownership of the concrete object itself, but for Marx, it was abstracted to value the object represents.  Marx saw that value, in this abstract form could be siphoned off through legal economic practices and in this Marx recognized exploitation.  If the value of the manufactured object was solely produced by the laborer, then the laborer who was not being paid the full measure of value was being cheated.

How this value was created and how it was extracted needed to be explained and, if possible, proved.  This was the work of Marx’s positive economic theory.  His theory center’s around the labor theory of value.  Marx’s labor theory of value–like that of Ricardo’s–finds its roots in Locke, who wrote,

For ‘tis not [merely] the Plough-man’s Pains, the Reaper’s and Thresher’s Toil, and the Bakers Sweat, is to be counted into the Bread we eat; the Labour of those who broke the Oxen, who digged and wrought the Iron and Stones, who felled and framed the Timber imployed [sic] about the Plough, Mill, Oven, or any other Utensils, which are vast Number, requisite to this Corn, from its being seed to be sown to its being made Bread, must all be charged on the account of Labour, and received as an effect of that: Nature and the Earth furnished only the almost worthless Materials, as in themselves.

This idea of value as an account of labor, a tally of each hour spent in every pursuit minimally necessary for the creation of each useful thing produced by human industry is taken virtually unquestioned from Locke through to Marx.  For simplicity’s sake, I’ll call this labor accounted for in the creation of a thing or commodity the labor of acquisition, which I define as labor necessary to bring about a commodity and deliver it into the hands of those who would use it.  For Marx, the labor of acquisition is a sufficient cause for and the sole determinant of the full value of every commodity.  Marx is alone in this.  Locke, Ricardo, and other economists all believe that there is more to the determination of value than the labor of acquisition.  

The advantage of Marx’s theory is that value can be objectively and empirically calculated, prior to markets of distribution.  It is obvious that, if the value of any given thing was exactly equal to the minimum number of human labor hours necessary to bring about its possession then we can objectively measure the value of every particular thing by simply counting up all the hours.  But there has always been a disadvantage associated with Marx’s cut and dry labor theory and that is use-value.

Political economists have–since Adam Smith at least–separated the value associated with the utility of an object, e.g. driving nails for a hammer or digging for a shovel, from the value it is said to exchange for with another object.  The former being the object’s use-value and the latter its exchange-value.  Smith and others suspected a relationship must exist between the two; however, by the time Marx was writing no one had yet to successfully formulate a theory showing how the two values related.  If use-value is a factor in determining exchange-value, as was suspected, then the labor of acquisition is not sufficient to determine value.  In other words, the central component of Marx’s positive economic theory, i.e. his labor theory of value, would be necessarily false.  Where Marx to simply include use-values, he would have to reintroduce markets and establish private property as necessary economic conditions.  Rather than do that, Marx opted to find a way to show that use-values were not a factor in value determinations.  


Part Two

Marx begins the first volume of Capital with a discussion of the commodity-form–that is a useful thing made for the purpose of exchanging it–which he considered the basic unit of capitalism.  At the very beginning of his investigation into the political economy of capitalism, Marx writes that the usefulness or use-value of a commodity is “independent of the amount of labour required to appropriate its useful qualities,” and a few sentences later, “use-values are only realized in use or in consumption.”  Now Marx realized, commodities, in order to exchange for each other at all, must have some common property, but Marx meant to prove that the value we associate with use, plays no part in determinations of appropriation of a thing (which recall is measured in labor), aside from the fact that it must have some use to even be considered worthy of appropriation.  Thus, utility or use is not the common property of all commodities, according to him.  

Marx then draws a bright line between subjective use-values and labor, dismissing the former as the valueless “material bearers” of exchange-value.  Like Locke in the quotation above, Marx has determined the material part to be worthless except that it is necessary as a value-bearer.  This role as value-bearer is unquantifiable, and so plays no part in the tallying of exchange-value.  Marx holds that use-values “constitute the material content of wealth, whatever its social form may be”.  By this he means that use-value is merely qualitative and has no value measurable in units, be they labor or anything else; it is–in Marx’s estimation–a function of the socially-determined, material form of the object.  He expresses it again this way, “As use-values, commodities differ above all in quality, while as exchange-values they can only differ in quantity, and therefore do not contain an atom of use-value”.  He means that when we are evaluating commodities for the purpose of trade, their usefulness is not a factor in determining their value to us.  Hence, Marx suggests use-values can and should be dismissed:

If then we disregard the use-value of commodities, only one property remains, that of being products of labour.  But even the product of labour has already been transformed in our hands.  If we make abstraction from its use-value, we abstract also from the material constituents and forms which make it a use-value.  It is no longer a table, a house, a piece of yarn or any other useful thing.  All its sensuous characteristics are extinguished.  Nor is it any longer the product of the labour of the joiner, the mason or the spinner, or of any other particular kind of productive labour.  With the disappearance of the useful character of the products of labour, the useful character of the kinds of labour embodied in them also disappears; this in turn entails the disappearance of the different concrete forms of labour.  They can no longer be distinguished, but are all together reduced to the same kind of labour, human labour in the abstract.

No one–as far as I know–questions Marx on this point.  Marx’s brilliance in finding a way to reduce value to the labor of acquisition, which is objectively and empirically accountable (at least in theory) is undermined by his inadvertently eliminating labor as a concept distinct from mere physical activity from his labor theory of value.  

To “disregard the use-value of commodities” is to assume that any random and purposeless physical action is labor.  Labor, however, is purposeful activity aimed at the creation of some particular object for which a use is intended.  Marx has abstracted use to being a property of a material thing, and in so doing he has missed use’s necessary relationship to laboring itself.  To be able to disregard use, Marx must claim that material things can have a use-value, without necessarily having a particular end (viz. use) associated with them by any human being.  That is to say that commodities may possess an abstract use, which requires no intention of any usage at all.  But such a thing is self-contradictory because it asserts that uses exist which do not require a user.  In other words, Marx is assuming here that although no human being has a use for a commodity, it may nevertheless possess an abstract utility (not a hypothetical one) which renders it a bearer of value as the product of labor.

Marx is entirely correct that use or use-value and the labor of acquisition are entirely distinct from each other, and that the latter is the concern of the producer while the former is the concern of the consumer.  He is also right to claim that in order to exchange at all, objects must share a common substance.  As we just saw Marx assumes that use has nothing to do with labor.  But it is consumption and thus use that drives the intention behind labor.  Without use, labor is indistinguishable from random physical activity.  It is through labor that we can see use’s relationship to value beginning to emerge.  Labor indeed is the common substance between all commodities, as Marx suspected, but labor itself is necessarily linked to use and so the use-value of commodities cannot be summarily disregarded without also disregarding labor from our theory of value.

To make this more concrete we might employ a simple reductio ad absurdum.  According to Marx’s theory, all value is equal only to the labor of acquisition.  Suppose now that you are tasked with digging a drainage ditch in your yard to protect your house from flooding.  Now rather than dig up the yard with your bare hands you seek a tool to assist in the excavation.  Now suppose that you find two digging objects that have the same labor that went into bringing them to you.  One is a large stainless steel cooking spoon and the other a steel-headed wooden-handled shovel.  Both of these commodities would be useful in digging up the yard, i.e. they would be better than using your hands, and both have the same labor of acquisition and so the same price at market.  According to Marx’s theory then they both have a use and so can bear value and the value to you the consumer should be perfectly equal.  Thus, since use-value is not a factor in determining value you should be just as likely to buy the spoon as to buy the shovel for digging the drainage ditch.  This obviously absurd.  The shovel is the better tool.  But to even say the better tool some quantitative measure of use must be employed.  If use can be quantitatively rendered, then use-values are not merely qualitative and simply the material form.  And if this is the case then use-values may, and probably do constitute a factor in determining value.


Part Three  

What is useful about an object is precisely that it saves labor toward some intended end and how much.  Marx’s divorce of the value of things–including things as commodities–from their material uses misses the obvious fact that to use a thing is synonymous with laboring with that thing and that laboring always has a use in mind.  Thus, labor can be found in both directions from one’s situational relationship to a particular commodity.  Just like every act of selling is an act of buying, so also is every act of valuing an act of appraisal of usage.  The use-value differs from the labor of acquisition in that it is future-oriented and evaluates upcoming labor expenditures in which the object might be some measure of assistance.  The labor of acquisition, as we well know, is past-oriented and evaluates the labor required to legally lay claim to the object that it may be used.  These two labor evaluations are both necessary to sufficiently yield a final value determination or exchange-value.  Value is recognized only in the combination of use-value and the labor of acquisition relative to the particular seller, buyer and the buyer’s task at hand.  

Locke showed that human beings need to come to possess a thing in order to use it (i.e. acquisition through labor), but they also require a reason to come to possess it in the first place (i.e. they need an intention to use that thing).  Also instructive here is Smith’s notion that labor itself carries both a utility and a disutility.  While I grant Marx that use is only possible when there are possession and possession requires a certain amount of labor expended to obtain an object, that labor is not the only labor with which we associate the value of a commodity.  The other labor involves the object’s deployment, i.e. it uses.  How many hours will it take you to dig the ditch with your bare hands?  How much less with the spoon?  How much less with the shovel?  If the shovel has less than the spoon and your hands it has a higher use-value.  This use-value is then set against the cost of the labor of acquisition.  If the shovel is so expensive, that it would require more hours of labor at another job for you to acquire it than it would take for you to dig the ditch with your bare hands, your interests would be best served by digging the ditch barehanded.  

The problem Marx hoped to solve with socialized abstract labor is that different physical labors are qualitatively different from each other, so that–for example–tailoring is different from weaving.  By abstraction, labor can be divested of its qualitative aspects leaving only its quantity, measured in labor hours.  Physical labor is different from the general pool of hours available to all human beings of the same relative abilities.  These temporal hours are all abstractly alike and so can be rendered merely quantitative, i.e. an hour of anyone’s labor-time is equal to an hour of everyone’s labor-time. 

And this is true as far as the labor of acquisition is concerned; for when the the buyer is confronted by the commodity, the particular skills, tools, and substances of its creation are all equalized in an abstract averaging.  There are exceptions, but those exceptions tend to fall on the side of use-value as opposed to the labor of acquisition.  Note however that this averaging is only true from the perspective of the buyer.  The seller rather sees the labor of acquisition as the lowest starting point of the object’s value, the minimum for which the commodity may be released; to the labor of acquisition, the seller always wishes to add the use-value of his would-be customer.  

Socialized abstract labor is an average in the mind of the buyer, and as such, it cannot be individuated although it is individually generated.  The effect is that socialized abstract labor appears as “one homogeneous mass of human labour-power”.  This mass can be divided among the “world of commodities”–supposedly providing their exchange-values–but it is not individuated because it has been averaged.  For example, if three workers produce use-values in x, y, and z quantities of physical labor-time, then their abstract labor would be the mean of x, y, and z.  It would be a statistical error to then reassert that each worker produced one-third of that average.  What can be asserted is that the commodities produced by the workers have a total labor of acquisition (from the point of view of the buyer) equal to the mean of x, y, and z.  

To understand the problem with this averaging, we need only return the fact that when divorced of the link to use and use-values, all of the “productive expenditures of human brains, muscles, nerves, hands, etc.” are not in fact labor.  What is deceptive in this quotation is Marx’s inclusion of the word “productive”, which attempts to sneak “use” back in where it was supposedly being disregarded.  To be productive is to produce something, and by the expenditure of human power.  With that broad definition, every action could be an act of socialized abstract human labor, including sleep which produces rest, or television-viewing which produces leisure.  This interpretation of “productive expenditures” renders every hour indistinguishable from every other hour of every person.  The only measure of socially necessary labor time, i.e. socialized abstract labor, would be the total amount of available hours for every conceivable human pursuit (viz. twenty-four a day) multiplied by the total number of human beings currently in existence.  Another absurdity! 

Surely Marx did not intend to reduce the meaning of “labor”–by socializing and abstracting it–to mere physical activity, any physical activity; instead, I imagine that he had some subset of physical activity that is purposeful.  To be purposeful is to have an end in mind, and that is the same as saying that there is some use to the activity in that it brings about some end.  Further, because this end is socialized, it cannot be just any end, but one that is socially defined (to be laborious).  Thus, not all “productive expenditures” that take human hours constitute labor; labor is only the hours of “productive expenditure” devoted to completing a socially-defined work task.  The “task” is necessary to distinguish labor from mere physical activity, which is to say that the qualitative aspect is what identifies the activity as labor.  When Marx abstracts it away, we can no longer tell what is and is not labor.  The “homogeneous mass of human labour-power” must include leisure hours as well as work hours.  Clearly if leisure can be considered labor then the capitalists are contributing their fair share of socialized abstract labor to society, by handling all of its socially necessary leisure time.  

Marx is sneaky with his words; the “socialized” in socialized abstract labor is meant to sneak “use” back in, for what could be socialized except the tasks labor is set to accomplish?  This is not to condemn abstract labor, but merely to show that such abstractions can only be quantified at the subjective, individual perspective.  To put it another way, I can count the number of hours it would take me to perform any kind of labor, because I–and I alone–know my relative abilities to complete a task.  My estimation would need to include my skills, my knowledges, and my relative physical situation, along with any and all tools at my disposal.  My present situation is vital.  Consider that an apple on the tree five miles from you takes longer to gather than one growing right in front of you.  The situation changes the labor of acquisition as well as use-value.  Thus, only I can estimate the abstract labor-time necessary to complete a task and that estimation applies only to myself.  These kinds of abstractions cannot be generalized, and so it is an error to socialize abstract labor as Marx has done.  A subjective labor theory it stands to reason does not commit this error.   

Before explaining the real problem, we should get a false problem out of the way.  The fact that the market value is not fully derived from labor-input, i.e. there is a subjective component of value appraised by the consumer, does not defeat Marx’s complaint of exploitation.  The value appropriated by the capitalist is merely the exchange-value already paid by the consumer; the use-value component of the consumer is not a factor between the laborer and the capitalist.  The exchange-value cannot be realized until the price is already attained, in this sense the price is merely the actualization of the mutually agreed upon exchange-value of the buyer and seller.  In order to keep the surplus-value the capitalist must be said to own the product before it is sold, i.e. the capitalist must also be the sole owner and seller of the product, and in order to ensure that there is a surplus-value the capitalist must ensure that the wages of the workers are below the price the commodity will fetch, whatever it will fetch.  What exploitation occurs then, happens prior to the commodity every reaching the market, and is equal exactly to the extent of surplus-value, as Marx claimed.  The subjective aspect of value-determination does not save the capitalist from a Marxist accusation of exploitation.     

The real problem with Marx’s theory is that his explanation is not sufficient to prove the exploitation of the laborers.  This is a result of the subjective component, for Marx’s argument is only sufficient if socialized abstract labor is solely responsible for the total value of a commodity.  Now, I have no doubt that if the laborers are being exploited by capital, the mechanism Marx describes is the one by which it is taking place.  But describing how workers could be exploited is a different thing from proving that they are being exploited.  In order to prove that workers are being exploited–assuming a subjective labor theory in necessary as I have claimed–one would have to show that the individual laborers are fully entitled to the product of their labor; that is that laborers are the sole owners and sellers of the commodities they produce.  

The difficulties this presents are more formidable than Marx understood.  The socialized production system–the form of socialism or communism that Marx recommends–would not necessarily entitle the laborers to the full measure of the exchange-value of their product any more than capitalism would.  If the products are common property or State property, Marx may have merely exchanged potential exploitation by capitalists for potential exploitation by demagogues and bureaucrats.  Socialism and Communism, as Marx understands them, do nothing to protect the laborers–their labor being only an abstract part of the whole–every individual laborer is just as alienated and just as vulnerable.  Without a theory proving that the individual laborers are solely entitled to the full value of their individual or collective productive input, Marx has yet to prove exploitation or provide a bulwark against it for workers.


Part Four  

Marx’s sense of the labor-process is incomplete without his understanding of the role of capital.  To understand capital’s role we need to examine the “self-valorization” appearance of capital.  “[C]apital is money, capital is commodities”, Marx said.  Commodities must possess a useful aspect to have a value, and the use of capital–according to Marx–is Kapitalverwertung or self-valorization.  Self-valorization is the appearance through the process of labor-production and exchange in which capital seems to conjure from itself a profit.  Seen from a particular view-point a certain investment of capital yields a certain amount of return, which is above and beyond the value of the investment itself which is retained or reclaimed.  In concrete terms, the use of capital qua capital is to yield a profit.  To yield a “profit”, the value of the capital invested must itself be maintained.  This is obvious, for if the investment depreciated correspondingly with the return–as David Ricardo believed–the loss of capital would equal the return.  We might benefit by thinking of this as simply selling to the laborers, there would be no return beyond the price of the capital sold to (rather than invested in) the firm.  The process by which capital self-valorizes is mysterious and still heavily debated today by economists.  Marx’s theory reveals self-valorization to be a subterfuge from where the exploitation of labor results in profit, through the ownership of the means of production.

To elucidate this process, we may simply build on Marx’s basic model of exploitation given above.  As the owner’s of the means of production, the capitalists’ lay claim to the products of labor.  The product is sold for more than it cost the capitalist to produce creating a profit.  This profit is appropriated by the capitalists thus valorizing their capital.  Marx maintained that the market value was fixed at the socially minimal amount of labor necessary to produce the product and thus the only way the capitalist could extract a profit would be to pay the laborer’s less than the full amount of value their labor produced.  Economic logic would prove that the more capital investment the more profit, and so the capitalist is likely to invest at least a portion of this profit into more capital.  Thus perpetuating the cycle of capital reinvestment.

Marx recognized that the material use of capital is its ability to save labor, and by so doing increase the productivity of labor and cheapen commodities.  The inherent conflict comes from the tendency–also noted by Ricardo–for wages to drop as a result.  The laborers experience the increase of productivity as a reduction of the value of their labor, while the capitalist experiences the same as an increase in their profits, at least for a time.  The conflicting interests of laborers and capitalists Marx details forms the basis for his belief in class warfare, which is inherent to the capitalist mode of production.

As a condemnation of capitalism, this argument is sufficient; but in order to correct the problem capitalism merely represents, we need to better understand the role of capital in production.  Towards this end, we might assert that the value capital adds to a commodity (or a service or end of any kind) is in the labor it saves through its usage.  This saved labor is necessarily different from the labor involved in the production of the capital itself.  To put this in Marxian terms, we might argue that just as there is a difference between labor and labor power, capital, also, has differing costs and productive value capacities.  A labor cost (the exchange-value of the capital) and a use-value (measurable in labor-saved) work much like labor and labor power; so while the average healthy laborer’s ability to produce value typically exceeds the cost of sustenance necessary to reproduce the laborer’s efforts, well-deployed capital has the ability to produce more labor-savings than the labor costs to produce and maintain it.  History bears this out, since the whole productive increase of the industrial revolution is a testament to this fact.

The value of capital is equal to the reduction of the necessary labor required to meet some end, e.g. produce some thing or benefit from some service–its use-value–minus the labor cost of producing the capital–its exchange-value.  Since, as Marx said, “capital is commodities”, all commodities are also capital; and thus, all commodities share this determination of value.  This definition of value is a serious problem for the rest of Marx’s theories, but a major insight for us: use-values are quantifiable in units of labor-saved and are also necessary factors in the determination of a commodity’s value to a consumer, who must be the ultimate source of all economic evaluations in this theory.  Keep in mind that this determination is necessarily subjective, although it can be plural, it is never communal or social.

Marx’s labor theory, which supposes that the value of a thing consists wholly in the labor that went into its construction, provided a technique for objectively calculating the absolute value of a thing without the need for markets.  If his labor theory were correct, then it would follow that markets could be dispensed with, which is tantamount to saying exchange-value could be independently determined, as long as the quantity of (absolute) use-values, i.e. the material object themselves themselves, comprising the total social need could be determined.  Without any need for market determination, money in such a system loses its function and may also go extinct, taking with it the irrational desire for endless accumulation, or what Marx’s perceived as avarice.  Privatizing property for consumption becomes reducible to what we find useful as a society and nothing more, this would effectively restore natural checks and balances to the economic system while keeping modern production methods in place.  This–I believe–is what Marx had in mind by “scientific socialism”.  From where Marx sat, a society of modestly intelligent people, living and laboring in a particularly communal political arrangement should be able to assess and meet their own needs–as use-values–quite easily; thus the only thing holding back a just and equitable society of such individuals must be the oppressive historical development of capitalist greed; held in place by the tyrannical political force of the monopolists of the means of production, viz. the bourgeoisie.

Scientific utopia, then, wholly depends on just one thing: the ability to derive absolute value from the calculation of socialized abstract labor in a commodity, which I have just shown is not actually possible.  Without it, scientific socialism is an impossibility because we can never determine the true value of things merely by accounting for their production labor.  We need to incorporate use-values, which means, consumers fulfill the role of ultimately deciding for themselves how much a commodity is worth.  Thus, markets and money will prove to be indispensable.

But all is not lost here.  The upshot of capital having a use-value in saving labor is that the labor savings could potentially be made beneficial to the society at large, contingent on a restructuring of the economic order.  Scientific socialism may be dead, but some flavor of socialism may yet prove triumphant.  But to prove it, the real culprit behind economic oppression must first be identified.

To summarize then, Marx’s genius was to identify the mutual exclusivity of interests between capitalists and laborers and to recognize the exploitation of the laborers by the capitalists.  His folly, on the other hand, was to develop a theory of value based entirely on labor that failed to recognized the necessary factor of use-value in total value determinations.  I have attempted to show that use-value is a factor determining the exchange-value of all commodities at market and thus it is not the labor of production alone that determines value and price.  I have also shown how the labor of production or what I call the labor of acquisition reduces the general value of a commodity on the market and so the lower the labor of acquisition, the more valuable the commodity.  Use-values, contra Marx, are in fact quantifiable and serve as the positive value that allows consumers to spend more on a commodity than the labor of acquisition.  Without the labor of acquisition as the sole determinate of value, most of Marx’s subsequent socio-political and economic theories fall apart.  Nevertheless, I insist that capitalism is still exploitative and that the theory that proves it is yet to be addressed.


Afterword      

I believe that profit, rent, and interest are the real agents of economic oppression in the capitalist system.  As a family of economic behaviors we might call these acts by the collective name of rent.  Essentially, neither private property nor bourgeois greed, but rent that is the source of class conflict and exploitation in capitalism.  Without going into the details, I want to briefly outline the structure of a non-Marxist theory of labor exploitation.  While Marx’s theory based exploitation on positive economic theory, this theory bases it on the political right and social necessity of private property.  In other words, the same theory that provides private property rights to the members of a society condemns rent as a practice just as surely as it condemns thievery.

The justification for a right to private property–according to John Locke–is based on the labor of acquisition and relies on the necessity of individual use and/or consumption.  In other words, without the need to individually consume the property, the labor of acquisition is insufficient to bestow private property legitimation.  The right of the landlord against the tenant farmer to the ownership of the farm land falls on the side of the tenant farmer who actually needs the land.  Those who both need the land and do the work of acquiring it have a rightful claim.  It follows from this that when the need to individually consume is dispensed with, the prior justification for ownership goes with it.  One might only own private property when one both legitimately labored to earn it, and retains some need for its exclusive private usage.

So it is that rent, in any form, fails to justify ownership for the renter.  The problem is obvious: when I lease out my object for money I give up my claim to a personal need to exclusively use that object.  My claim then rests only on my legitimate possession of the object through some labor of acquisition.  However, we just saw that this is inadequate.  Further troubling the matter is the claim of the rentee, who does possess the back-ground need necessary to justify exclusive ownership.  But the two aspects cannot be spread across two people, as exclusive rights must in fact be exclusive.  If the property rights are shared between the renter and rentee, then the property in question is by definition common property, and neither party has an exclusive claim to it.  This is all well and good, until a superfluous charge is made by the renter upon the rentee, i.e. the rent itself.  In order to charge this rent, the renter would have to hold exclusive property rights upon the object being lent.  But the act of lending itself simultaneously dissolves these rights.  The actual ownership of the lent object is shared or common and no charge may be made to property the rentee has a fully justified claim too, i.e. the rentee “owns”.

The “use” of renting is not a legitimate use because it is self-defeating.  To lend is to share property rights with another, to charge rent on shared property cannot be legitimated.  And this is where capitalism is exploitative.  Capitalism allows for rent in all its sundry forms.  The most serious problem with capitalism has never been private property or greed or markets or money, but only the family of illegitimate economic procedures we call rent.  Rent allows those with a claim of prior ownership to extort value from the value-generating labor efforts of those who use that capital.  This extortion cannot be legitimated despite the fact that capitalism allows it.  Here then is the source of economic inequality and oppression we find inherent in capitalist countries.

 

A Non-Marxist Theory of Exploitation: And How to Resolve It

Karl Marx (1818-1883), philosopher and German poli
UNSPECIFIED – CIRCA 1865: Karl Marx (1818-1883), philosopher and German politician. (Photo by Roger Viollet Collection/Getty Images)

Introduction

It’s been a century and a half since Karl Marx published Das Kapital and a century since the Soviet revolution.   I think it’s time to consider class and labor exploitation outside the shadow of Marx’s economic system.  Central to Marx’s social and economic theory was his theory of exploitation.  His theory, in a nutshell, proposed that capital siphons off the value labor produces allowing the owners of the means of production to self-validate their property.  More specifically, the contribution of the owners in providing the means of production was already reflected in the value of the commodity at market.  So, the commodity’s profit was entirely owing to the contribution of labor.  Any profit taken by the owners of the means of production, i.e. the capitalists, was an exploitation of the workers’ labor efforts.  Marx’s entire positive economic theory was an attempt to expose how the system generated exploitation and, assuming Marx’s determinism, would eventually succumb to its own contradictions and give way to scientific communism.

There are many arguments against Marx’s account, but the most notable is a lack of capitalism’s demise.  I’m no proponent of determinism, but even if capitalism is determined to fail, the lack of failure despite reoccurring economic collapses, seems to paint a picture of capitalism as a flawed, perhaps even contradictory, system that nevertheless, humankind is willing to support and sustain indefinitely.  Contradiction is not enough to overthrow a failing system, a new system must be ready in the wings to takes its place.  Communism itself seems contradictory as it seems to suggest that humans, who may produce and “own” in common, may consume in common as well.  This last is not possible and without it neither is communism.  Private property it seems is here to stay.  The question for this century is how to affect private property without exploitation and without contradiction.

To take a step in that direction, I want to challenge Marx’s account and give an alternative theory of capital’s exploitation of labor.  My alternative is based on the labor theory of private property, like that proposed by John Locke.  If I’m right, the justification establishing private property rights also implies that capitalism, as it is generally understood, is exploitative of labor efforts.  Whereas Marx saw the exploitation of labor as a result of his theory of value–one based exclusively on labor–this theory insists that labor is exploited because the ownership of the means of production is only justified by those doing the labor of producing.  Labor alone justifies ownership and this ownership is necessary to claims of entitlement to profit.  Like Marx’s theory, this theory sees the fractionation and distribution of profits from the sale of commodities as the method that exploits labor.  The theory differs from Marx’s solely as to why the mechanism of exploitation is unjust.

The labor theory of private property is not itself without controversy.  For the sake of expediency, however, I will leave arguments against the labor theory of private property aside for now and simply assume that it is the best available justification for establishing private property rights.  The goal here is not to argue for labor theory but to show that if labor theory is the best justification for private property then capitalism must be exploitative.  Aside from Marxists, we might all agree that private property needs some sort of justification.  As Locke observed, there is no natural justification why this or that thing might be privately owned.  Thus, we seek some social justification to exclude all others from the use of a thing that cannot be consumed except exclusively.   Like Locke, we seek a method for individuating the common world that we might all agree is fair.  The result of this fair method would be a justified scheme of private property ownership.

Labor theory satisfies this method by asserting that by laboring to acquire a thing for the purpose of exclusively consuming it one ought to have the right to fulfill that purpose.  Labor thereby justifies ownership.  Ownership here, it is important to note, is limited to those things one intends on using one’s self.  Without this boundary, labor cannot be applied to anything, and this renders any labor theory of property uncogent, as Robert Nozick has pointed out.  For example, we might say that a crafter who sews bags is entitled to the use of the bag unless they transfer that right by some legitimate method.  They are neither entitled to do whatever they wish with the bag nor is the scope of the bag indeterminable.  What is important here is that labor theory requires a background right, namely the assumption that since one must exclusively use certain goods if one is to use them at all then one must of some means of legitimately gaining exclusivity.  Also important is the fact that the labor theory of property implies that labor has a stronger claim to ownership than mere nominal claims.  In other words, a claim to private property is only as good as the labor claim supporting it.  For example, in the case of the means of production, the mere owners of capital have no labor claims and thus have no legitimate claim to either the means of production or the products that are produced with them.

Before moving on, I wish to be as explicit as possible about what I mean as my labor theory of property.  For the most part, I will follow Locke’s reasoning; however, I am making a few modifications or making explicit what is implicit in Locke.  Firstly, Locke’s theory applies only inside a society and that as such, it is not a universal theory of individual rights, but a theory for individual rights as a need of society.  Civilizations, if they hope to remain stable, must solve the problem of the individual consumption of the common world, and this is what the labor theory of property does.  Secondly, I link labor to use far more explicitly than Locke, although it is both present and essential in Locke’s argument.  Labor acquisition operates only under the assumption of personal use in a labor theory of property.  Thirdly, the link between labor and use is bridged by intention; thus, intentionality serves, in lieu of actual use, to justify exclusive ownership in this labor theory of property.  I acknowledge that these are no minor modifications and that each should be argued for; however, I feel this paper is not the place for those arguments and I hope my reader will grant these assumptions until such time as they may be questioned directly.

Ironically perhaps, this theory is positioned in opposition to both the dominant western economic paradigm, which merely assumes the nominal ownership of the capitalists, as well as the reigning critique of that paradigm, viz. Marxism.  Thus, I have two arguments to make here: (1) that capitalism is exploitative and (2) that it is not for the reasons Marx claimed it is.  Naturally, I will structure what follows in two parts.  The first part is why an economic critique based on Marx’s labor theory of value fails to prove exploitation.  The second part will hopefully show why a theory of exploitation based on a labor theory of property works.

Part 1: Contra Marx

It is no easy task to critique and condemn a thinker whose conclusions one feels to be more or less all correct.  The reason is quite simply that the argument continues to feel right even where it is wrong.  Marx’s folly was not that capitalism is actually just, but that he misidentified how and why capitalism is actually unjust.  Marx rested his critique of capitalism by trying to identify all value with labor, specifically the labor in a commodity.  The labor that went into making the commodity and delivering it into the hands of the consumer is, for Marx, the sole source of all its value.  This is Marx’s labor theory of value.  My critique of Marx begins right here with his positive economics.  I want to show that Marx’s positive economics is missing some key elements, which render value-judgments questionable.  I will argue that labor does provide all the value of the commodities, as Marx claimed, but that labor only has value in concert with use and further that labor-use only bestows value because it justifies a claim to ownership.  In other words, labor provides a value to commodities precisely because it justifies private property rights, or the right to exclusively consume a commodity.

Marx, I fear, got off on the wrong foot and everything went wrong from there.   In the first section of the first chapter of the first volume of Capital, he makes the dubious assumption that use is purely qualitative and so can be summarily dismissed from any further talk of value.  There is nothing like an argument to critique here.  Marx simply assumes use plays no part in value determinations and moves on to what he believes does.  This doesn’t present a problem, Marx thought since he was only concerned with a commodity’s value on the market and not as it is consumed.  He believes that the price (exchange-value) hovers around what he called the socially-necessary abstract labor required to produce the commodity.  In short, how much human labor time society needs to invest in bringing a commodity to market given current technological capabilities.  Since Marx’s interests in commodities values end at the moment of acquisition, use-value is indeed superfluous.  But it appears that rather than letting his assumptions imply his theory, Marx let his theory imply his assumptions.  Use-value was an inconvenient truth for political economists, one that Marx had to explain away rather than explain and incorporate into his theory, and he did just that.

Despite Marx’s assumption, use’s relationship to value is just as pivotal as labor’s.  Primarily, use provides the desire for an object in the first place.  Marx too admitted as much, but use is not just qualitative.  We can measure how useful a commodity is or estimate how useful a commodity is likely to be in similar terms of abstract labor that Marx employed.  Only here we’re not speaking of the labor embodied in an object, but the labor saved to us by employing an object at a given task.  For example, we might claim that the use-value of a phone is the labor it saves us from having to travel to speak with someone.  If use-value can be quantified in this way, then Marx’s theory has a gaping hole in it.   This is significant because it adds another value into the equation that results in exchange-value or price.  Now instead of saying exchange-value simply equals the amount of socially necessary abstract labor involved in a commodity’s production, we must fit use-value in somehow.

Marx looked at the situation too closely from the point of view of the producer of commodities and not nearly enough from the point of view of the consumer of commodities.  From the point of view of the producer, the question of value is nebulous, but from the point of view of the consumer, it is much more concrete.  The consumer simply estimates the use-value of the object in question relative to themselves and then subtracts the cost of acquiring it.  This is necessarily an individual estimation since objects can only be consumed individually.  Interestingly, the cost of acquiring it is the consumers attempt to guess the quantity of socially necessary abstract labor they would have to expend to achieve the acquisition.   In other words, the consumer looks around for the best deal (socially averaged labor cost) and then determines if the commodity will ultimately save them more value in use, if so it is worth buying, if not, then your interests are best served by leaving it on the shelf.  If this sounds a lot like the market place to you, you’re right.  The market determines the price by allowing consumers to weigh use-values against production costs in relations to their needs.  Just determining the costs, as Marx did, is insufficient to determine value.  Value is not socially abstract in the way Marx claimed, that is as an abstraction of production efforts.  Instead, value is socially abstract as an averaging of consumer’s demands.

This means that neoclassical positive economics is much closer to the truth than Marx’s.  Neoclassical models adequately describe the actions of values in the volatile market place.  But before western economists break open the champaign, a great irony should be noted: the values these western economic models describe purely quantitatively are in fact units of labor-use.  Neoclassical economics is describing the labor consumers estimate they will save by purchasing a commodity against the labor they must expend to acquire it.  Consumers, and never producers, set the value on all commodities.  These facts are highly problematic for both Marxists and neoclassical economics alike.  Simply put, Marxist economists can’t actually describe how value is generated because Marx’s positive economic model doesn’t take consumer’s needs into consideration, and neoclassical economists can calculate values, but can’t tell you what it is they are calculating because they don’t have a phenomenological model of what value is.  For a normative economic system hoping to be fair, we’re going to need a model that can both calculate value and understand what that value consists of.

Part 2: Exploitation Through Property

The labor theory of property as I have described it reveals exploitation in capitalism that does not rely on value.  Values factor in only afterward and reveal only how much exploitation is going on.  The exploitation itself is based on the justifications for the way we come to own property and what rights are conferred as we come to own it.  A need for personal use is the necessary background right for an act of labor to make something exclusively ours.  It is not enough merely to labor, but to labor for something we must use individually for private property rights to be conferred.  As Locke maintained, it is unacceptable to deprive others of that which one has no intention of using in a civilized society.  One is free to claim goods through labor for personal use and even exchange, which is also a form of personal use.  But there are other uses which violate the principle which made the property exclusively yours and this family of special uses are what we must examine to understand the exploitative nature of capitalism.  This family of special uses go by the name of rent and consist of rent, interest, and profit.

To illustrate why rent is problematic we should return to Locke who conceived of the labor theory of property as an argument purporting to show that the tenant farmers were more entitled to the land and produce of that land they worked than the landlords who nominally owned it.  The landlords claim to the land was purely political, often as a grant from the monarch.  This feudal system perpetually kept the tenant farmers in a state of perpetual poverty despite the fact that they worked ceaselessly and at the same time kept their lords, who produced nothing, very wealthy.  Locke, like Marx, recognized this as exploitation and struggled to both explain and condemn it.  While I feel Locke got closer to the truth than Marx, he nevertheless failed to successful eradicate exploitation with his pro-capitalist theory.  Instead, the feudalism against which Locke argued was replaced by a capitalist system, which, while initially radical, grew more and more conservative over time, eventually coming to resemble the feudalism it replaced.  By the time Marx began his critique, capitalism had gone from undermining the landlords’ claim to exclusive ownership to reinforcing their position.  While landlords under feudalism relied on ancestry and royal grants, landlords under capitalism relied on their socially agreed-upon right, through labor, to private property to justify their wealth.

The capitalist’s claim, as it comes to us from Locke, is simply that as the owner of the property they have the right to use that property as they will, including lending or leasing it.  Now no one holds this position absolutely.  For example, no one is going to claim that private property ownership of a handgun gives one the right to use it on anyone you want.  However, rent it could be argued is a much more reasonable use of property; at least that is until we consider what conditions are necessary to grant property to owners in the first place.  As we saw, labor theory asserts that labor and an intention of personal use are both necessary for a legitimate claim to exclusion.  Even if we assume that an owner justly acquired their property through labor, the moment the intention to personally use that property is removed, the legitimacy of their claim falls away.  They simply no longer meet the prior condition.  By definition, there cannot be an intention of personal use in the act of renting.

The use of rent does not require exclusivity.  Rent requires a dual use, as an object of rent is only rentable when someone else has a need to use it exclusively but cannot acquire it themselves.  During rent, the object is released to the person with a need for the exclusive use of it, but the nominal ownership is retained.  Thus, during rent a second use is created for private property beyond the one that requires exclusive use.  The problem of rent can be seen as making what is private, common again.  When the property is shared it cannot by definition be private.  What we end up with is two individuals, each with a partial claim to the same property: the renter and the rentee.  The renter has a claim to ownership through the labor of acquisition to the object, but at the point of lending the object for rent, the renter lacks a need for exclusive use.  The rentee has the right through the need and intention of exclusive use, but when renting lacks the labor of acquisition to legitimately possession of the object.  This seeming impasse is not insurmountable, however.  The right granting power of labor, it must be recalled, rests on wholly on the background right for the need for exclusive use.   The rentee, it seems, ultimately has the stronger claim.

Before moving on, let us consider a few objections.  First, we might ask, but what of lending without charge?  If renting is a problem, wouldn’t lending be a problem too?  The short answer is no, lending is not a problem because there is not a second use in play with lending.  The ownership may remain with the lender because the lender is not able to use the object while it is being lent.  It is the dual use of “private” property that defeats its own justification.

Second, rent, our capitalist friends might suggest, is not the same thing as profit.  In some ways this is true, but as far as what is at stake here, it is not.  The question for the laborer and the capitalist is merely a question of who owns the product at the end of the production line.  The laborer has the need for the means of production to produce, just as the owner of the means of production requires labor to produce.  Just like the rented object we can see that labor has a stronger claim to ownership under a labor theory of property.  So it is that under a labor theory of property ownership of the product is legitimately labor’s to use or sell.  In fact, the claim to the ownership of the means of production is most legitimately that of the laborers.  Under a fair economic system then, all businesses should actually be owned by the workers and not by capitalist investors.  This is just like saying, as Locke did, that farms ought to be owned by the farmers and not the landlords.  The landlord–or capitalist as it may be–should be incentivized to sell the land they are not using themselves by disallowing a profit to be generated from it.  As with the land, the same holds true of the means of production.

Finally, what about incentives?  What incentive can there be for lending, which we might readily admit is useful and necessary to an economy, without rent, interest, or profit?  Incentives don’t really change.  What changes are how those incentives get expressed.  People will still have reasons to lend, just not to make more money.  In fact, the incentive to make more money is at the root of much of the world’s sorrows.  The unending desire for more, that is the ethos of capitalism is an evil that pits all against all in perpetual economic warfare.  But that is the structure of the system, not the incentive to acquire, nor the incentive to be economically secure and comfortable.  Everyone might want infinitely more money, but barred for the uses of rent, interest, and profit, they’ll have to labor for every cent they make.  My hunch is that this will create a disincentive to acquiring more and more wealth.  Without the endless desire to accumulate, resources can be distributed more equally both inside society and between societies.  Without the fierce competition for resources, we might slow down our mad rush to strip the Earth and foul our nest.  We might all breathe a little easier, live a little better, and smile at one another.  The goods of economic peace to too great to be counted, and that is the only incentive we ought to be concerned with.

To reiterate, the goal of an economic system based on private property must be to get the property that needs to be used exclusively into the hands of those who need to use it, i.e., to make it their exclusive property.  Measuring capitalism by that standard we can see that capitalism fails because it does not distribute private property to those who are most entitled to it, that is those who are going to actually, physically use it.  The fact that capitalism allows for rent sets it at odds with the economic advantages of a system based on private property.  Make no mistake, I am forcing capitalists into a rather unpalatable dilemma with this argument.  Either private property is justifiable or rent (and profit and interest) are justifiable, but not both, and capitalism as it currently defined requires both.  Rent, obviously, requires private property, but we might have a private property based system that does not permit rent.  But the capitalist, who lives by rent or interest or profit, as opposed to labor, is necessarily eliminated from economic consideration.  With the capitalist, goes capitalism as we know it.  What is left is a private property based economic system that deals in free markets, utilizes money, and places ownership of the means of production squarely in the hands of those who will use it best, the workers.  Surely such a system is not capitalist, but neither could it be considered communist or even particularly socialist.  Whatever name history chooses for it, let us have it.

There are many pragmatic problems to overcome in implementing such a system, but these problems are neither innumerable nor insurmountable.  Such as system is not only feasible it is efficient.  It is more efficient than the perpetual cycles of boom and bust, of welfare and austerity, of liberalism and conservatism that cost millions of dollars and hours, every time we have to stop and reverse direction.  This simple system will go farther to end economic exploitation with less effort, and at the same time achieve a fair and balanced economic situation that is at the same time more stable and more flexible than either capitalism or communism or any hybrid could possibly hope to be.

 

 

Locke, Marx, & Two Theories of Labor

Back in April I won the Next System Project’s essay contest for a graduate essay attempting to reimagine our economic structure.  Below is the link to my essay on published on their site.

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Locke, Marx, and Two Theories of Labor